Entities / agencies falling within the Department’s mandate

Presentation to the Portfolio Committee: Water & Environment

Presentation byMs T Sigwaza

Chief Director: Institutional Oversight26 - 27 January 2011

Entities / agencies falling within the Department’s mandate

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Policy and legislative mandates• In South Africa the Constitution make a distinction between water as a

natural resource and water as a municipal service.

• The key government policies pertaining to water are set out in two policy papers as follows: the National White Paper on Water Policy (1997) and The Strategic Framework for Water Services (2003)

• The legislative mandates follow from these policies and are set out in two pieces of legislation: The National Water Act (Act 36 of 1998) and The Water Services Act (Act 108 of 1997).

• In terms of the current policy and legislative mandates, it is the Minister who is the custodian , policy maker and regulator for the water sector.

• There is no independent regulator for water, (intention to establish an economic regulator) although a Water Tribunal was established by the National Water Act to provide independent reviews& dispute resolutions.

The Institutional Challenge

• The current institutional landscape is complex with about 184 institutions reporting to the Minister of Water & Environmental Affairs.– 2 functional Catchment management agencies and 5 gazetted.– Water user associations & irrigation boards = 167 – Water boards = 13 OR 14?– Water Research Commission– Trans-Caledon Tunnel Authority (TCTA)

• Water Tribunal• National Water Advisory Committee• About 169 municipalties (WSA’s ) regulated by Minister.

OVERVIEW OF WATER BOARDS OVERVIEW OF WATER BOARDS (WBS)(WBS)

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Mandate and legislative frameworkMandate and legislative framework

• WBs derive their mandate from the Water Services Act, 1997

• WBs also have to act within the following legislative framework:– Water Services Act– PFMA & Treasury Regulations– Municipal Finance Management Act– Division of Revenue Act– Municipal Structures & Systems Act

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Oversight role over WBsOversight role over WBs

List of Documents submitted to the Minister Legislation

Policy Statements Sec 39 of Water Services Act, 1997

Shareholder Compacts Treasury Regulation 29.2

Corporate Plan & projection of revenue, expenditure & borrowings

Sec 52 of PFMA, 1999

Treasury Regulation 29.1

Business Plans Sec 40 of Water Services Act, 1997

Quarterly Reports Treasury Regulation 29.3.1

Annual Reports Sec 44 of Water Services Act, 1997 Sec 55(1)(d) & 65 of PFMA, 1999

Tariff Increases Sec 42 of MFMA, 2003

Financial misconduct procedures report Treasury Regulation 33.3.1

Materiality & Significance Framework Treasury Regulation 28.3.1

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WATER BOARD ESTABLISHED AGE

Amatola Water 1997 13 years

Bloem Water 1991 19 years

Botshelo Water 1998 12 years

Bushbuckridge Water 1997 13 years

Lepelle Northern Water 1997 13 years

Magalies Water 1969 41 years

Mhlathuze Water 1980 30 years

Namakwa Water 1978 32 years

Overberg Water 1993 17 years

Pelladrift Water 1997 13 years

Rand Water 1904 106 years

Sedibeng Water 1979 31 years

Umgeni Water 1974 36 years

Ikangala Water serving a rural community in Mpumalanga was disestablished in 2009 and DWA regional office is currently providing water services to the affected communities.

Albany Coast Water was disestablished in 2010 and its operations merged with that of Amatola Water.

Water boards establishment dates

CAPITAL EXPENDITURE

Rand Water 905,205 950,000 4.7%Umgeni Water 334,457 556,636 39.9%Sedibeng Water 14,199 14,412 1.5%Lepelle Northern Water 20,816 60,545 65.6%Magalies Water 19,992 46,348 56.9%Bloem Water 14,861 57,400 74.1%Mhlathuze Water 177,617 26,056 -581.7%Amatola Water 41,363 58,743 29.6%Bushbuck Ridge Water 370 212 -74.5%Botshelo Water 390 1,324 70.5%Overberg Water 6,538 6,301 -3.8%Namakwa Water 2,269 0 Albany Coast Water 1,630 0 Pelladrift Water Board 784 1,450 45.9%TOTAL 1,540,491 1,779,427 13.4%

Under / -OverspendWATER BOARD

ACTUAL 2010

BUDGET 2010

Capital expenditure budget in R’000

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REVENUE - R 000 AT YEAR END JUNE 2010

WATER BOARDREVENUE 2010

R'000 % OF TOTALCUMULATIVE

%2009 REVENUE

IN R'000INDEX

2010:2009

ALBANY COAST WATER 2,610 0.03% 0.03% 3,148 82.91AMATOLA WATER 239,546 2.97% 3.00% 200,803 119.29BLOEM WATER 226,488 2.81% 5.81% 196,796 115.09BOTSHELO WATER 39,000 0.48% 6.30% 38,084 102.41BUSHBUCK RIDGE WATER 78,881 0.98% 7.28% 60,891 129.54LEPELLE NORTHERN WATER 249,639 3.10% 10.37% 203,284 122.80MAGALIES WATER 166,985 2.07% 12.45% 158,046 105.66MHLATHUZE WATER 214,547 2.66% 15.11% 135,556 158.27NAMAKWA WATER 10,690 0.13% 15.24% 9,640 110.89OVERBERG WATER 22,475 0.28% 15.52% 18,951 118.60PELLADRIFT WATER BOARD 12,904 0.16% 15.68% 6,414 201.18RAND WATER 4,974,596 61.72% 77.40% 4,274,363 116.38SEDIBENG WATER 403,143 5.00% 82.40% 305,809 131.83UMGENI WATER 1,418,233 17.60% 100.00% 1,289,035 110.02TOTAL REVENUE 8,059,737 100.00% 6,897,672 116.85

REVENUE - 2008

0%3% 3%0%1%3%2%

3%0%0%0%

62%

5%

18% ALBANY COAST WATER

AMATOLA WATER

BLOEM WATER

BOTSHELO WATER

BUSHBUCK RIDGE WATER

LEPELLE NORTHERN WATER

MAGALIES WATER

MHLATHUZE WATER

NAMAKWA WATER

OVERBERG WATER

PELLADRIFT WATER BOARD

RAND WATER

SEDIBENG WATER

UMGENI WATER

Water board sales based on a volumes sales of 2,3 billion kiloliters

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Water boards profits/-losses for the year

WATER BOARDSURPLUS 2010

R'000 % OF TOTALCUMULATIVE

%2009 SURPLUS

IN R'000INDEX

2010:2009

ALBANY 630 0.07% 0.07% -184 -342.39AMATOLA -17,584 -1.93% -1.86% 12,483 -140.86BLOEM -16,619 -1.82% -3.69% 46,449 -35.78BOTSHELO 7,936 0.87% -2.82% -20,569 238.58BUSHBUCK 10,956 1.20% -1.61% 4,715 -32.36LEPELLE -5,383 -0.59% -2.20% 18,371 -29.30MAGALIES 31,306 3.44% 1.23% 48,572 64.45MHLATHUZE 21,160 2.32% 3.56% 28,397 74.51NAMAKWA -10,796 -1.19% 2.37% -17,080 63.21OVBERBERG 392 0.04% 2.42% 2,497 15.70PELLADRIFT 2,075 0.23% 2.64% -614 337.95RAND 301,634 33.12% 35.77% 829,764 36.35SEDIBENG 44,265 4.86% 40.63% 56,277 78.66UMGENI 540,712 59.37% 100.00% 392,866 137.63SURPLUS / -DEFICIT FOR THE YEAR 910,684 100.00% 1,401,944 64.96

REVENUE - 2008

0%3% 3%0%1%3%2%

3%0%0%0%

62%

5%

18% ALBANY COAST WATER

AMATOLA WATER

BLOEM WATER

BOTSHELO WATER

BUSHBUCK RIDGE WATER

LEPELLE NORTHERN WATER

MAGALIES WATER

MHLATHUZE WATER

NAMAKWA WATER

OVERBERG WATER

PELLADRIFT WATER BOARD

RAND WATER

SEDIBENG WATER

UMGENI WATER

SURPLUS - 2008

-100,000

0

100,000

200,000

300,000

400,000

500,000

600,000

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Debt owed by municipalities by water boards

Amatola 15,089,534 14,724,762 364,772 0 0 0 364,772Bloem Water 86,474,924 26,750,562 1,928,199 1,463,371 8,045,636 48,287,156 59,724,362Botshelo Water 63,244,039 5,894,746 5,778,601 6,141,332 4,646,717 40,782,643 57,349,293Bushbuckridge Water 211,747,792 10,927,935 10,101,413 9,211,357 9,836,902 171,670,185 200,819,857Lepelle Northern Water 312,101,032 23,441,129 13,136,152 9,870,839 14,866,538 250,786,374 288,659,903Magalies Water 13,995,234 7,901,012 3,719,948 1,375,125 999,148 1 6,094,222Mhlathuze Water 11,385,921 7,892,008 661,511 1,172,097 1,466,340 193,965 3,493,913Namakwa Water 2,935,654 1,780,636 578,497 576,521 0 0 1,155,018Overberg Water 685,404 685,404 0 0 0 0 0Pelladrift Water 334,952 117,115 115,729 102,108 0 0 217,837Sedibeng Water 263,471,730 31,357,302 28,168,485 23,344,453 21,990,700 158,610,790 232,114,428Rand Water 573,416,486 529,595,623 37,654,698 6,166,165 0 0 1,187,337Umgeni Water 145,821,145 137,992,903 5,127,618 394,274 299,353 2,006,997 4,608,273TOTAL 1,700,703,847 799,061,137 107,335,623 59,817,642 62,151,334 672,338,111 855,789,215

DEBTORS AGE ANALYSIS 100.00% 46.98% 6.31% 3.52% 3.65% 39.53% 50.32%

DAYS 120+ ARREARS

WATER BOARDS MUNICIPAL DEBT SUMMARY - SEPTEMBER 2010

OUTSTANDING BALANCE CURRENT DAYS 30 DAYS 60 DAYS 90

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Generic challenges facing water boards• Profits declined from the previous year by 65% mainly due to

high energy, chemical (purification) and labour cost together with significant bad debt write-offs against moderate level of tariff and volumeincreases.

• Long-term service level agreement not signed by a number of municipalities, this impedes the Water Boards ability to enter into long-term CAPEX investment plans, resulting in aging infrastructure with high level of water losses.

• Municipalities often use their equitable share allocated to them for water for other purposes, National Treasury states that this is an unconditional grant which cannot be paid directly to water boards, therefore debt recovery from poor municipalities are a problem.

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• General governance problem, conflict between board members and also between the board and senior management. One of the reasons for this is that in terms of the Water Services Act, the CEO is involved in the appointment of the board, while the board appoints the CEO, in effect the CEO is involved in the appointment of his/her boss.

• Deteriorating quality of raw water at intake increases purification cost.

• Processing of license applications are delayed resulting in many water board exceeding their license conditions.

• Staff retention and skill shortage especially at remotely located water boards.

• Magalies, Namakwa and Botshelo are yet to submit their 2010 annual report.

Generic challenges facing water boards

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Support offered water boards

• Water boards do accept the principle that water services must also be expanded to poor areas, in this regard water boards are willing to play an implementing role.

• However in order to extend services to the poor they will require support from the fiscus as the revenue generating ability to supply poor communities will be limited and banks will be unwilling to fund unviable projects.

• Water Boards do support the institutional re-alignment project and accept that they may have to be rationalized in order to enhance service delivery.

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• Water boards are willing to and able to support DWA with water resource management and water quality issues.

• One of the key areas that Rand Water wants to get involved in is sanitation services.

• Some of the larger water boards have the ability to generate significant quantities of energy and are keenly awaiting regulatory approval for entering into such venture.

Support offered water boards

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OVERVIEW OF OTHER ENTITIESOVERVIEW OF OTHER ENTITIES

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Trans-Caledon Tunnel Authority (TCTA) • Established in 1986 in terms of the National Water Act, is

categorized as a Schedule 2 major public entity and is subject to the PFMA.

• TCTA is engaged in project financing and implementation together with being a specialized liability management entity. It finance and implements bulk raw water infrastructure in a cost effective manner to benefit water consumers.

• Projects under management by the TCTA:– Lesotho Highlands Water Project – Debt under management is R16.8

billion, paid for from revenue generated from water sales. Loan raised on explicit government guarantees.

– Berg Water Project – Debt under management is R1,6 billion, paid for from revenue generated from water sales, and loan raised by implied government guarantees.

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– Vaal River Eastern System Augmentation Project – Debt under management is R2,7 billion, paid for from revenue generated from water sales, and loan raised by implied government guarantees.

• Four new mandates have been issued to the TCTA including the Olifants River Water Resources Development Project Phase 2, the Komati Water Scheme Augmentation Project, the Mooi-Mgeni Transfer Scheme and the Mokolo-Crocodile Water Augmentation Project.

• Problems are experience in finalizing the mandates for the Mooi-Mgeni scheme as some of the benefiting municipalities are unwilling to sign off-take agreement resulting in Umgeni Water being unwilling to take on the risk for non-payment, as this will negatively affect their credit rating and borrowing ability.

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Trans-Caledon Tunnel Authority (TCTA)

Water Research Commission (WRC)Water Research Commission (WRC)• Established in terms of the Water Research Act.• Plays an important role in water research by establishing needs

and priorities for research, stimulating and funding water research according to priority, promoting effective transfer of information and technology and enhancing the knowledge and capacity of the water sector.

• Key research areas includes:– Water resource management– Water linked ecosystems– Water use and waste management– Water utilization in agriculture

• Derives its income from a levy on raw water tariffs which is currently approximately 4 cents a cubic meter for domestic use.

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Catchment Management Agencies cont…Catchment Management Agencies cont…

• Inkomati CMA (ICMA) – The ICMA was established by government gazette notice No. 26185 on 26 March 2004 in terms of section 78(1) of the National Water Act.

– The Governing Board was appointed in September 2005 for a 3 year period.– Transfer and delegation of functions – a MoA between the ICMA and the

Mpumalanga Regional Office was signed in August 2007, and the first catchment strategy was submitted to Minister in April 2010.

– Seed funding have been provided for the ICMA, and once activities are transferred, ICMA will be less dependent on state funding which amounts to approximately R20 million p.a.

– Water resource management functions have been delegated to the ICMA to support them in their initial functions as set out in Section 80 of the NWA.

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• Breede – Overberg CMA (BOCMA) – Was established by Government Gazette notice No. 27793 on 13 July 2005 in terms of section78(1) of the NWA

–BOCMA and the Western Cape Regional Office have been working closely in implementing water resource management functions resulting in a cooperative and successful relationship.–The water resource management functions have been formally delegated to BOCMA in December 2010 which will result in an effective transfer of functions from the regional office to BOCMA–The Catchment Management Strategy is under consideration and will be issued to Minister for approval in March 2011.

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Challenges: –Debate on the number of CMA’s to be established needs resolution–Board of CMA are appointed as representatives of various stakeholders, this excludes technical individuals being appointed to the board–Stakeholders are concerned that the establishment of CMA may result in higher water tariffs –Clarity of roles with other institutions as water boards and other institutions are able and willing to perform similar functions

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Water User Associations (WUA)Water User Associations (WUA)• There is limited capacity within DWA to transform all

irrigation boards (IB) into WUA.• To date about 30% of irrigation boards have been

transformed into WUA since 1998. Reason for the slow pace of transformation are:

– Protection of existing interest and assets managed by IB.– Lack of involvement of all sectors and representation in terms of

race and gender this suit existing interest as fully represented institutions are likely to dilute the interest of existing members.

• Main problem with established WUA to support emerging farmers is their lack of financial and operational capacity within newly established WUA.

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Komati Basin Water Authority (KBWA)Komati Basin Water Authority (KBWA)

• KBWA was established in terms of a treaty on water resources of the Komati River basin entered into between South Africa and Swaziland.

• It is governed by a Joint Water Commission, whose members are officials from both Governments.

• KBWA is responsible for financing, building, operating and maintaining the water resources infrastructure in the Komati River basin.

• KBWA collects revenue from various users and ensure payment for the scheme.

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INSTITUTIONAL REFORMS AND REALIGNMENT

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Objectives

• To develop an institutional framework that clearly defines roles, responsibilities and accountability within the entire water value chain.

• To have sufficient economies of scale inorder to be efficient and have financial resources to employ skilled managers, professional staff and technicians plus ability to raise sufficient capital funds for investment in essential water infrastructure (find solutions where non-financial viability exists).

• Need to promote good governance and corporatisation of water sector institutions thereby ensuring separation of policy making,

shareholding, and regulation functions. • Rationalise and align the number of institutions reporting to the

minister inorder to have an effective span of control and viable water institutions

END

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